Lump Sum Exit Scheme: Farmers shouldn’t feel guilty for retiring
31st August 2021
Catherine Vickery See profile
Farmers have a great opportunity to retire following Defra’s announcement of the Lump Sum Exit Scheme and shouldn’t feel guilty for doing so.
Now is a prime opportunity to start thinking about retirement for a number of reasons but particularly if you have no one to pass the business on to.
Inheritance tax shouldn’t stop you
Inheritance Tax (IHT) can be a barrier to retirement for some farmers but there are ways to lock in the tax benefits. You genuinely don’t have to keep farming until the day you die to be able to protect the family from IHT.
The Lump Sum Exit Scheme will offer up to £100,000 to farmers who want to retire, based on the area payments they would have received until the end of the transition period in 2027.
Capital Gains Tax is low
This means now is a great time to look at the potential benefits and tie it in with retirement plans. At present, Capital Gains Tax is as low as 10%, providing a great opportunity to pass on assets, but at some point those rates are going to go up.
Farmers should think about where they want to be in the next five years. Do you still want to be farming the same way you are now? What if you start to struggle physically?
Retirement can also help the next generation. It can enable farming families to help their children financially and see the impact it has on them – it’s called giving with a warm hand, rather than waiting until death to pass over the money.
But don’t leave yourself short of money. Make sure you have the means to look after yourself for the rest of your lives.
Whether that’s investing in assets which will generate a strong income, living off the capital or other pension planning – if there is a little bit of lead time there are steps we can put in place. For instance, you can put a bit more money into pension funds and discuss what investments might be suitable.
Retire without guilt
The key thing is that farmers don’t have to carry on farming. There’s no need to feel guilty about wanting to retire. Now is the perfect time to get planning with the prospect of these payments as it takes a while to retire.
If you would like to talk about your retirement options, then please do get in touch.